Samuel, S.; Manassian, A. (Ed.). Proceedings of the 34th Annual Congress of the European Accounting Association

Abstract:

Since IOSCO’s decision (May, 2000) to accept IASs for cross-border listing and since governments started to hand over accounting standard setting authority to the International Accounting Standards Board (IASB) (EU Regulation EC N° 1606/2002, Australia FRC July 2002), the IASB is well under way to become the global accounting standard setter. For the IASB, being a private organization, widespread constituents’ participation in its due process of standard setting is a key element to reinforce its credentials as a legitimate standard setter. The importance of constituents’ participation was emphasized in the wake of the financial crisis by high level international authorities (G 20, 2009;
Financial Stability Forum, 2009; High Level Group of financial supervision EU (de Larosièregroup), 2009) who expressed concerns with regard to the lack of widespread constituents’ representation in the process of international accounting standard setting. Given the importance of widespread stakeholder participation in standard setting, academic calls for more research on constituent participation (Barth, 2000; Cooper and Robson, 2006) also emerged in the literature. Following upon the concerns expressed by international authorities and the academic calls for research, this paper sets out to analyse
stakeholder diversity and geographical diversity in constituents’ formal participation in the due process
of the international accounting standard setter over the period 1995-2007. Based on an analysis of 7442 comment letters sent, we find wider participation (in terms of the number of constituents) of different types of stakeholders (more participation of association of preparers, financial institutions, national standard setters and governments) and of a larger number of countries (in terms of the number of
countries from which comment letters are received) after the reform of the standard setter in 2001. However, if we focus on constituents’ participation intensity, we notice a number of biases in this constituents’ representation in the formal public consultation of the standard setter. In terms of stakeholder diversity, we find that formal user participation in the due process of international
accounting standard setting is now almost absent after the reform of the standard setter. From the geographical difference perspective we notice first that constituents less familiar with the accounting values embedded in IAS (e.g. optimism, transparency, flexibility), its private-sector standard setting system and the English language participate significantly less in the international accounting standard setting process. Second preparers’ participation is mainly driven by economic incentives (the adoption status of the IASs), whereas non-preparers’ participation is to a large extent significantly influenced by the institutional characteristics of the country from which the constituent originates. So the IASB sees itself informed in its public consultation process by the views of preparers facing mainly mandatory IAS adoption, of non preparers originating from a country with common law origin and of constituents familiar with the so-called “Anglo-Saxon system of Accounting”. The user perspective is almost lacking in the public consultation process. The IASB needs to acknowledge this bias and employ other methods to get informed about the views of constituents from countries with code law origin, users, preparers facing voluntary adoption of the standards and constituents not familiar with the “so-called system of Anglo-Saxon accounting” if it wants to be a global standard setter.